Big changes to Ontario's dairy quota policy

Monday, July 13, 2015

by SUSAN MANN

Dairy quota policy changes being introduced next month in Ontario could boost the amount of quota available for farmers to buy on the monthly exchange.

Dairy Farmers of Ontario chair Ralph Dietrich says the changes have been recommended by the quota committee for the five Eastern Canadian provinces (Ontario, Quebec, Nova Scotia, New Brunswick and Prince Edward Island) that are part of the milk pooling agreement. Those provinces share revenues from industrial and fluid milk markets and work co-operatively on other matters. The Dairy Farmers of Ontario board has approved the changes.

“We hope there’s going to be an opportunity for a little more quota to go through the exchange, which will help producers wanting to buy quota,” Dietrich says.

Among the policies:

• All non-saleable quota is being eliminated as of the administration and operation of the August quota exchange. Currently about 10 per cent of Ontario farmers’ quota holdings are non-saleable because “of the quota increases we’ve had in the past years,” Dietrich says. Dairy Farmers does not allow farmers to sell quota added to a producer’s holdings as a part of general increases given to all dairy producers in the province.
• The capped quota price is dropping to $24,000 per kilogram from $25,000 per kilogram starting with the August quota exchange. Dietrich says the conversion of non-saleable to saleable quota “increased the assets of the farmer. To counter that somewhat we did reduce the (quota price) by $1,000. At the end of the day, it’s still a bit of a net gain to the producers.”
• Effective immediately, all future quota increases will be saleable. Previously, general quota increases given to all farmers were non-saleable while general quota decreases were taken from producers’ non-saleable quota amount.
• Starting immediately, farmers selling on-going dairy farms must sell 10 per cent of their quota on the exchange.
• As of Aug. 1, farmers can apply to establish a linked facility, which means a farmer who has a barn that isn't big enough for the cows needed to fill all of their quota will be able to produce milk on two different properties, under the same license, for up to five years. The properties have to be within 10 kilometres of each other. During the five-year time period, the expectation is they would build a new structure, such as a new barn with larger capacity, Dietrich says. After the five years, the quota that was split in two would "come back as one into the new barn."

About the demand for this policy, Dietrich says they've had requests for it in the past "and it seems to be something that makes sense for the industry.

There are also some changes to the new entrant quota assistance program for 2016. Furthermore, the P5 quota committee agreed to develop a parent-to-child quota top-up policy by Feb. 1, 2016.

Dietrich says when the P5 provinces harmonized quota policies in 2009, the provinces agreed to do a review after five years. The review was done during last year and included consultations with farmers. In Ontario, those were at county annual meetings along with at the organization’s policy conferences.

The changes “are some of the results (of the review) that we’re putting into place,” he explains.

The Ontario monthly quota exchange has been chronically short of quota for farmers to buy for several years. A chart on Dairy Farmers’ website listing results for the past 24 months shows for July farmers put in bids for 10,029.63 kilograms of quota while just 442.56 kg were offered for sale. In June, 10,159.37 kg were sought and 429.96 kg were offered for sale.

The highest amount wanted this year so far in one month was in February when 11,210.85 kg were sought and just 470.40 kg were available for sale.

The capped quota price in Ontario and the other P5 provinces, soon to be $24,000 per kg, is the lowest across Canada. The highest is in British Columbia where quota was $44,000 per kg this spring.

Eastern Ontario dairy farmer Andy Senn says the establishment of a linked facility policy won’t help with his situation. Last year, Senn and his business partner and brother-in-law, Franz Suter, unsuccessfully challenged Dairy Farmers policies prohibiting mergers at the Ontario Agriculture, Food and Rural Affairs Appeal Tribunal.

The two farmers had bought an on-going dairy farm near their St-Bernardin-area operation three years ago and wanted to merge their quota with the 177 kg of quota obtained through the purchase. Both Dairy Farmers and the tribunal denied their request.

“It’s completely different,” he says of the new linked facilities policy in comparison with what they were seeking to do. “It (the new policy) has nothing to do with mergers.”

About the new policies, Senn says “hopefully there’s going to be more quota available on the market because they’re making everything saleable now. If we get quota increases, producers who aren’t able to fill it will be able to sell it now.”

About the capped quota price decrease, Senn says it’s not much of a difference.

Caledon-area dairy farmer Philip Armstrong applauds the removal of non-saleable quota. “It’s a good thing and this makes it more straightforward. It (quota) is now all saleable.” BF